Newkirk Design Group files Chapter 7 bankruptcy

by Eric Olson

SBJ Reporter

eolson@sbj.net

Springfield advertising agency Newkirk Design Group Inc. voluntarily filed for Chapter 7 bankruptcy protection June 11 in the Western District of Missouri U.S. Bankruptcy Court.

The company has folded, and its four employees were let go, said owner Jeff Newkirk.

Newkirk Design Group owes 32 creditors less than $100,000. The company has less than $18,000 in assets, including accounts receivables and office equipment, according to court documents.

Newkirk said the company's bankruptcy is largely due to the fallout from 9-11, with companies freezing advertising dollars in the wake of the national crisis and on the brink of recession. Newkirk Design Group lost 80 percent of its business after 9-11, Newkirk said, and never recovered.

"Everything dried up. It just went to a standstill," Newkirk said. "It stayed that way for almost two years."

The company was formed in 1996 and peaked in 2000 when it employed six and had about 12 regular clients plus additional spot-work accounts.

That year the company had billings of $385,000, according to Newkirk.

"It plummeted after that," he said.

While the company struggled to stay afloat, Newkirk said, he was reluctant to fire personnel.

"We tried to keep our employee base as much as we could," Newkirk said. "Looking back, once things started to slow, I should have done what most large agencies do and start firing people. We had a small group and we were like a family, so I was fairly reluctant to do that."

Ad spending shrinkage

Media spending shrunk nationwide after 9-11, according to Competitive Media Reporting, a New York City-based group that measures ad buys. Media spending in 2001 was 9.7 percent lower than in 2000, Competitive Media reported. Similarly, ad agency employment dropped 10.2 percent between 2001 and 2002, according to Advertising Age magazine.

An estimated 20,000 jobs were slashed between 2001 and 2002.

Though fairly well insulated from national trends, some Springfield ad companies reduced employment to soften the blow.

Marlin Company, for instance, let seven employees go in April 2002. At the time, company owner Dennis Marlin cited conservative client spending, as well as technological advancements and greater efficiencies.

Marlin said business has since picked up. Billings this year are 20 percent greater than last year, he said.

The company has hired two employees in the last 30 days.

"It definitely has started to come back. It started late last year and has been pretty strong this year," Marlin said.

But Marlin said he understands how the economic downturn would force a small agency into bankruptcy.

"When everybody had the downturn, it put a lot of financial strain on agencies," he said. "It depends on how much reserves you had to weather that storm. It was a pretty long window of time."

Keeping on

Newkirk has sold the company's office building at 2029 E. Grand. However, he continues to work as a freelance designer under the name Newkirk Design Agency. He has moved to a small space in the Woodruff Building where he has five repeat clients.

Under Chapter 7 bankruptcy law, Newkirk Design Group's assets will be sold for cash by a court-appointed trustee. Administrative and legal expenses are paid first, and the remainder goes to creditors.

Cantrell-Barnes Printing in Springfield is among the largest creditors, owed $11,247. Vice President David Cantrell hopes to get paid, but he isn't holding his breath.

"We've encountered this before," Cantrell said. "That's part of doing business with creative people.

"You enter into an agreement in good faith and that's all you can do. Knowing Jeff I'm sure he'll make it right in some way. I understand the situation. I wish it would have been different."

Other Springfield companies listed as creditors owed more than $1,000 are 417 Magazine, Ed J. Rice Co., Horst/Tymon, Independent Printing, Moore Printing, Rockafellow Photography, Signs Now and Springfield Business Journal.

The largest portion of debt is owed to the federal government. Newkirk Design Group fell behind on taxes; it owes $19,069 to the Internal Revenue Service, Missouri Department of Revenue, Division of Employment Security and Social Security, and Medicare offices.

The tax debts are listed as unsecured priority claims and will receive payment first. There are no secured creditors.